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Thursday, 3 November 1983
Page: 2312


Mr KEATING (Treasurer)(4.09) —I move:

That the Bill be now read a second time.

This Bill is related to two income tax measures announced in the May economic statement. One of these is the modification of the income averaging provisions for primary producers and the other is the reduction in the income threshold at which special rates of tax become payable on certain income of children.

Income Averaging Provisions for Primary Producers

Under this heading are amendments complementary to the changes to be made to the primary producer averaging system which I mentioned in speaking to the previous Bill and which restore that system to one of automatic application each year. The amendments will establish the rate of complementary tax that is to be payable by way of averaging adjustment where the average income of a taxpayer for a year exceeds his or her taxable income for that year. The complementary tax is the obverse of the averaging rebate which is allowed in years when the average income is less than taxable income. Its effect is to adjust the tax payable to the amount appropriate to application of average tax rates to taxable income from primary production. As I indicated earlier, the revised system is to apply for the 1983-84 year and subsequent income years.

Special Rates of Tax Applicable to Minors

The income tax law currently provides for tax at the rate of 46 per cent or higher to apply to certain types of income derived by some unmarried minors. As indicated in May, the $1,040 income threshold at which these rates become payable has come to be exploited in many tax minimisation schemes and is to be reduced by this Bill to $416 with effect from 1 July 1983. The shading-in arrangements for incomes marginally greater than the threshold amount are also being appropriately adjusted.

In introducing these amendments I want to make clear one point that has been the subject of media comment, and that is that these special rates of tax apply only to certain types of income derived by some unmarried minors. The relevant legislation-Division 6AA of the Income Tax Assessment Act, which was enacted in 1980 to discourage income splitting by diverson of income to children-contains a number of important exclusions. One of these is for particular classes of children who are not subject to the measures at all-for example, children who are handicapped, disabled, orphaned or in full time employment. The other exclusion covers specific classes of income such as salary and wages and other remuneration for services rendered, income from a business genuinely carried on by a minor, income from damages awards, compensation, divorce settlements, deceased estates and the like, where no avoidance arrangements are involved. It is therefore quite clear that the provisions do not apply to children's earnings attributable to their own part time or full time work. To refer to it in such terms as the newsboys' tax is absolute nonsense and a grave misrepresentation of its true nature. The particular amendments proposed will yield nothing in 1983- 84 but are expected to increase revenue by $70m in 1984-85. Provisions of the Bill are explained in detail in a memorandum that has been made available to honourable members. I commend the Bill to the House.

Debate (on motion by Mr Howard) adjourned.